Albert's sole proprietorship owns the following assets:

* Potential § 1245 recapture of $30,000.
** Straight-line depreciation was used.
Albert sells his sole proprietorship for $470,000.Calculate Albert's recognized gain or loss and classify it as capital or ordinary.
A)$200,000 ordinary income.
B)$200,000 capital gain.
C)$100,000 ordinary income and $100,000 capital gain.
D)$90,000 ordinary income and $110,000 capital gain.
E)None of the above.

Question

Albert's sole proprietorship owns the following assets:

* Potential § 1245 recapture of $30,000.
** Straight-line depreciation was used.
Albert sells his sole proprietorship for $470,000.Calculate Albert's recognized gain or loss and classify it as capital or ordinary.
A)$200,000 ordinary income. 
B)$200,000 capital gain. 
C)$100,000 ordinary income and $100,000 capital gain. 
D)$90,000 ordinary income and $110,000 capital gain. 
E)None of the above.

Quizplus · Accepted Answer

11ea7f05_2e9b_fcac_92e1_cbd3ca2debca_TB4123_00 
The recognized gain is $200,000.However,since the sale of a sole proprietorship is treated as the sale of individual assets,the gain or loss on each asset must be calculated in order to determine the amount of ordinary income and the amount of capital gain.
 11ea7f05_2e9b_fcad_92e1_c990e7b0686f_TB4123_00 *Actually § 1231 gain,which in this case will be treated as LTCG.

Albert's Sole Proprietorship Owns the Following Assets